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IMF Chief Backs Note Ban and GST, Says Indian Economy on 'Very Solid Track'

Describing the two major recent reforms in India — demonetisation and Goods and Services Tax (GST) — as a monumental effort, Lagarde said it is hardly surprising that there "is a little bit of a short-term slowdown" as a result.

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Updated:October 15, 2017, 9:27 AM IST
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IMF Chief Backs Note Ban and GST, Says Indian Economy on 'Very Solid Track'
File image of Christine Lagarde. (Image: Reuters)
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Washington: Days after the International Monetary Fund lowered its growth forecast for the current and the next year, IMF chief Christine Lagarde on Sunday said the Indian economy is on a "very solid track" in the mid-term.

"Turning to India... we have slightly downgraded India; but we believe that India is for the medium and long-term on a growth track that is much more solid as a result of the structural reforms that have been conducted in India in the last couple of years," the IMF Managing Director said.

Describing the two major recent reforms in India — demonetisation and Goods and Services Tax (GST) — as a monumental effort, Lagarde said it is hardly surprising that there "is a little bit of a short-term slowdown" as a result.

"But for the medium term, we see a very solid track ahead for the Indian economy," she said to a question on India.

"We very much hope that the combination of fiscal, because the deficit has been reduced, inflation has been down significantly, and the structural reforms will actually deliver the jobs that the Indian population, particularly the young Indian people expect in the future," Lagarde said.

Speaking at a separate news conference, Finance Minister Arun Jaitley said India had carried out key the structural reforms at the right time when the growth rate was high and it will serve the country well in the days to come.

"When the world was growing at two-and-a-half per cent, India was the fastest-growing major economy in the world. That was a time to really fix the roof. You don't have to wait for a downward slide in order to do it," Jaitley told a group of Indian reporters at a news conference in Washington.

"I think, this was just the right time to bring about structural changes," he said.

The finance minister took a shot at his critics who claim that demonetisation has hurt the Indian economy — at least in the short-run.

"The fundamental question is: Does India continue to indefinitely be a cash-dominated economy? To say it's a very risky proposition, it will have adverse consequences for a quarter or two, so let's not attempt it? Can India say, you will have de-stocking, so lets not attempt a GST?," the finance minister asked.

Among his critics were several leaders from the opposition Congress party. Jaitley said the BJP simply did what the Congress couldn't while they were in power.

"Attacking or ending this black money was never a priority for the Congress. So their concern (about demonetisation) is natural. And GST was a Congress move. But since (the Congress) party is an opportunist party, it is opposing it," he said.

"Populism is what we did not indulge in. We could have let people live in a cash dominated economy and let India continue to have a shadow economy and have everyone really prosper on that basis. (But) we struck a blow to that kind of an economy. That's not populism. That was the right economic policy to follow," he said.

The Indian government has, however, received support from top leaders of the IMF and the World Bank who have called the slowness in recent Indian growth rate "an aberration" and a short-term one.

Jaitley said the positive responses and statements about the Indian economy by the world leaders had "increased the confidence of India".

"There is a global appreciation of the fact that India has the capacity and courage to carry out structural reforms like demonetisation and GST," he said.


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